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European retail giants Ahold and Delhaize have announced their intention to press ahead with a full-scale merger of equals this morning.

The merger will create a combined group with 6,500 stores and 375,000 staff serving over 50 million customers per week in the United States and in Europe.

Mats Jansson, chairman of Delhaize, will become chairman of Ahold Delhaize. Jan Hommen, chairman of Royal Ahold, and Jacques de Vaucleroy, Delhaize Group director, will become vice chairmen of Ahold Delhaize

Dick Boer, CEO of Ahold, will become the wider group’s CEO, while Delhaize CEO Frans Muller will become deputy CEO and chief integration officer

In a release this morning the companies said: “The transaction will create significant value, with anticipated run-rate synergies of €500 million per year to be fully realized in the third year after completion.”

“Both companies are highly cash generative which will allow Ahold Delhaize to invest in future growth and deliver attractive returns to shareholders”

At completion, Delhaize shareholders will receive 4.75 Ahold ordinary shares for each Delhaize ordinary share. Ahold shareholders will own 61% of the combined company’s equity and Delhaize shareholders will own 39%.

The transaction is expected to be completed mid-2016, subject to regulatory clearances.

Morning update

Ahold shares were up 2.8% this morning to €19.5, but Delhaize shareholders look less happy with the agreement as shares fell 4.1% to €84.4. 

Elsewhere, Agriculture group Wynnstay (WYN) has reported a 10% fall in first half revenues as it fights against a “difficult trading backdrop” amid low output prices for farmers.

Wynnstay’s revenues were down 10% to £200.6m in six months to 30th April from £222.5m in the same period last year. Underling operating profit was up 4.9% to £5.1m as market share was maintained in key trading areas.

Profit growth was driven by its specialist retail division, which concentrates on farming supplies, with operating profit up 10% to £2.85m. Operating profits at its agricultural division reduced by 5% to £2.23m.

Chief Executive Ken Greetham commented: “Trading conditions for farmers have been difficult for the last two years. However the industry is cyclical and the macro economic factors around world demand remain compelling.”

“Our recently completed business planning exercise highlights the growth opportunities available to the group and the board remains confident about Wynnstay’s continued future growth, built on the existing solid foundations.”

House broker Shore Capital called the results “resilient” this morning, adding: “Market conditions have remained tough with output prices for farmers at low levels and often below the cost of the production. However, the diverse nature of Wynnstay’s business has again come to the fore, enabling the business to deliver progress in the face of a number of headwinds.”

Wynnstay shares edged down 0.2% to 589p in early trading.

Also, last night Nestlé announced that François-Xavier Roger, currently chief financial officer of Takeda Pharmaceutical Japan, will become its own CFO from 1 July. He replaces Wan Ling Martello, who has taken up new responsibilities as head of Asia, Oceania and Africa.

Yesterday in the City

The markets had a more sedate day yesterday after Monday’s strong rally, with the FTSE 100 edging up 0.1% to 6,834.9pts.

It was another decent day for the retail sector, with Marks & Spencer (MKS) amongst the FTSE’s biggest rising – gaining 2.7% to 564p and Sports Direct (SPD) topping the FTSE 100 climbers, rising 3.2% to 725p after a broker upgrade.

The grocery sector in general trended up – Diageo (DGE) was up 1.3% to 1,932p, Tesco (TSCO) 1% to 216.2p, Sainsbury’s (SBRY) up 1.3% to 269.2p and Ocado (OCDO) shot up 3.8% to 410p.

One of the day’s weaker performers was Associated British Foods (ABF), which fell 1% to 3,064p after RBC cut its rating on the shares from outperform to sector perform.